For nearly thirty years, Don Williams has chosen to fill his family’s prescriptions about three blocks from his Preston Hollow home, at his favorite community pharmacy. But this might be the year he breaks the routine.

Last year, his insurer dropped Dougherty’s as a “preferred” pharmacy.

Neon lights up the flagship Dougherty's Pharmacy in Preston Royal Village as night falls.

(Smiley N. Pool/Staff Photographer)

“And it bothers the heck out of me,” said the local businessman who enjoys the 1960-esque bright red neon lights and old-fashioned decor of the Dougherty’s Pharmacy in Preston Royal Village.

Indeed, independent pharmacies like Dougherty’s have faced major challenges in recent years.

The negotiating tactics of the third-party groups that administer employer-based drug programs are limiting their customer base.

The marketing power of retail pharmacy chains makes it hard to draw a younger clientele.

Add to that the difficulty of passing the business down from one generation to the next.

But some are hoping that their focus on quality care and community service will help keep them afloat in turbulent times.

W.B. Dougherty's original state pharmacy certificate hangs in a conference room at the flagship Dougherty's Pharmacy in Preston Royal Village.

(Smiley N. Pool/Staff Photographer)

Dougherty’s — one of the oldest independent pharmacy companies in Texas — originally opened as family-owned business in Oak Cliff during the depression era, before the flagship moved to Preston Road in 1967.

That’s the one Williams has remained loyal to since moving to the neighborhood in 1989. But the pharmacy has also become “a more expensive proposition,” said Williams, 65, CEO of a software company called ClubTec.

As a result of the recent change, Williams can only get a 30-day supply of his family’s medications (instead of three months) at a time, and the deductibles his family pays for multiple regular prescriptions have doubled.

To save about $200 a month, he’s debating a switch to a nearby retail pharmacy chain, although he’s holding out — at least for now.

“My concern is that we’re going to lose all our independents,” he said. “And for no reason of their own.”

Not selling out

Dougherty’s interim president and board chairman, James Leslie, says pharmacies like his want to continue to be seen as “part of the fabric of the community” — a place where the local pharmacist not only knows the customer’s name and medical history, but one where the pharmacy can sponsor neighborhood baseball teams and local 5K runs.

“But there’s a lot of squeeze on the independents,” he noted. “The pharmacists are getting tired. They want to continue to run the shop. But they also have to worry about meeting payroll.”

Independent community pharmacies represent 36 percent of all retail pharmacies in the United States and they’re a $79.8 billion marketplace, according to a 2017 report from the National Community Pharmacists Association.

They are mainly in rural areas where medical providers are few, and larger retail chains like CVS and Walgreens are sparse.

There were nearly 1,600 independents in Texas in 2016. But their presence has been decreasing nationally.

“They’re basically the small mom-and-pop guys,” said Audra Conwell, chief executive of the Alliance of Independent Pharmacists of Texas. “And their numbers have been a moving target.”

Generally, the owners of independent pharmacies operate one or two stores. Though a few like Dougherty’s and Fort Worth-based Best Value Pharmacies have grown to multiple locations in recent years.

To stay competitive, they are “repositioning themselves” Conwell said, by forging relationships with medical providers, introducing new ways of packaging pills to customers with multiple prescriptions and strategically consolidating.

And a consistent theme among them is “never sell out,” said Carter High, director of legislative affairs for Best Value. They want to keep the quaint community feel their largest consumer base — people 65 years and older — have gotten used to.

“I don't think we’d be doing the customers any justice by turning them over to an entity that answers to Wall Street,” High said.

So for some Texas independents, that means adding services, remodeling and buying out their undervalued small-town competitors.

Striking a balance

Some changes can already be seen at the flagship Dougherty’s pharmacy on Preston Road where, for many older customers, vintage neon lights and aisles of walking canes and medical equipment have been the hallmarks.

“But we have to walk that tightrope of being multigenerational,” said Steven Pettit, director of pharmacy operations for the company. “That means finding things that are interesting to a younger population and not forgetting the generation of people that made Dougherty’s what it is.”

In early 2017, a partnership with Children’s Health added a telemedicine kiosk to the Preston Road store, where parents can connect their children virtually to a pediatric specialist from a private booth for $55.

There’s a diabetes educator and registered dietitian to assist patients with needs that go beyond prescriptions and refills.

And this year, the company begins the first part of a three-phase makeover estimated at just under $1 million. It will modernize the look by ditching halogen and fluorescent lights for LED, and by adding a “health and wellness bar” where visitors can sample products and speak with health educators while waiting to pick up their medications.

And like other independent pharmacies in Texas, Dougherty’s — which is about to turn 90 and is one of few that is publicly traded — is growing.

It has been expanding regionally by scooping up other struggling pharmacies. There are now three locations in Dallas: on Preston Road, Campbell Road and at Legacy West. It has also acquired individual pharmacies in El Paso, Springtown and McAlester, Okla.

And it is eyeing opportunities to expand beyond the Southwest.

Dougherty’s is considering a buyout of a 20-store independent chain in Pennsylvania, Leslie said, although he would not provide details. Others have been doing the same.

There are now 14 pharmacies in the Best Value partnership, though each operates under a different name, and a local pharmacist determines the feel and scope of the store, not a corporate entity.

In part, the pharmacists hope that scale will help them to lower the cost of the goods, improve the balance sheets and make them a larger player with more bargaining power — particularly in the era of pharmacy benefit managers, the middle men that health insurance companies and employers use to negotiate drug costs.

The latter is one of the most significant external pressures on the business of independent community pharmacies, according to industry groups.

The Arkansas Insurance Department recently took over regulating PBMs in that state, after community pharmacists complained they were getting reimbursed less for the same prescriptions and being cut out of the networks that larger retail pharmacies benefit from.

“There’s not a lot of transparency,” said Conwell. Independent pharmacists in Texas will be pushing for similar oversight during the next legislative session, she said.

That might calm shoppers like Williams, who continues to pay more to go to Dougherty’s but has been vocal about the “squeeze” his pharmacy is under on social media.

Another challenge as the pharmacies consolidate will be keeping the quaintness that long-time customers love.

“It’s not the big box store feel,” said Williams. “The reason anybody goes back to anywhere is because they’re made to feel welcome. It’s just nice to have people always know who you are.”